JD Sports is facing another obstacle in its attempt to acquire the Footasylum chain, as the UK’s Competition and Markets Authority (CMA) has provisionally blocked the deal. This decision comes after a review of the CMA’s previous decision to halt the acquisition. As a result, JD Sports may be compelled to sell Footasylum, which it purchased in 2019.

Despite this setback, JD Sports remains determined to enhance Footasylum’s resources, product availability, and customer offering. The CMA had conducted an in-depth investigation into JD Sports’ takeover of Footasylum, which initially resulted in an unfavorable ruling. However, JD Sports successfully appealed against the decision in November of last year, with the Competition Appeal Tribunal deeming the CMA’s actions irrational and its understanding of the pandemic’s impact and the rise of direct-to-consumer (DTC) online sales by major sports brands incomplete.

In its most recent assessment, the CMA claims to have considered these factors but maintains that competition in terms of price, quality, range, and service levels could still be compromised. Despite this, JD Sports continues to criticize the CMA’s ruling. The company argues that the Covid-19 pandemic has greatly strengthened Nike and Adidas’ DTC strategies. It highlights that prior to the pandemic, DTC accounted for less than a third of Nike’s total sales, but it now represents 40%. Similarly, DTC made up around a third of Adidas’ total sales pre-pandemic and now makes up over 40%, with a goal of reaching 50% in a few years.

JD Sports asserts that while the CMA acknowledges the significant growth of DTC sales, it fails to recognize how this would limit Footasylum’s impact on competition. The company finds it perplexing that despite these substantial changes, the CMA’s conclusion remains unchanged. JD Sports struggles to understand how the merger could possibly result in a substantial reduction in competition in a market increasingly influenced by Nike and Adidas’ DTC strategies.

It is important to note that the CMA’s decision is currently provisional, and the full report is expected to be released next month. JD Sports intends to vigorously present its case to the CMA during this period.

Useful links:
1. UK Competition and Markets Authority
2. JD Sports website